2012 (10) TMI 982 - SC - Indian Laws

Default in payment of the instalments due - Sale of mortgaged property by Uttar Pradesh Finance Corporation (UPFC) - Sale made by the UPFC in exercise of the statutory powers vested in the Corporation by Section 29 of the State Financial Corporation Act, 1951 - Validity of the sale deed executed in favour of the writ petitioner during the subsistence of the mortgage in favour of the Corporation - Held that - The detailed recital made here in above clearly indicates that the property in question was duly advertised for sale pursuant whereto the fifth respondent had offered the highest amount. On acceptance of the said offer by the UPFC, the entire amount was paid and the sale was confirmed by the Corporation. No sale deed was however executed by the Corporation in favour of the fifth respondent. It also appears that before the property was put up for sale by the Corporation, the original owner, Smt. Nisha Devi Jaiswal had sold the same to the third and fourth respondents, who, in turn, had sold the same to the writ petitioner by sale deed dated 29.08.2001. The aforesaid sale by the original owners to the vendors of the writ petitioner and, thereafter, by said vendors to the petitioner himself was made when the property stood mortgaged in favour of the UPFC. It is in the above circumstances, that the writ petitioner had approached the High court seeking interference with the sale of the property made in favour of the fifth respondent pursuant to the advertisement dated 20.10.2002 issued by the UPFC and further for transfer of the property in favour of the writ petitioner besides restoration of possession thereof which was taken over by the Corporation. The sale made by the UPFC in favour of the fifth respondent was in exercise of the statutory powers vested in the Corporation by Section 29 of the State Financial Corporation Act, 1951. Under the aforesaid provisions of the Act default in re-payment of any loan by an industrial undertaking vests in the Financial Corporation the right to take over the management or possession or both of the industrial concern along with the right to transfer the property pledged, mortgaged, hypothecated or assigned to the Financial Corporation. By virtue of sub-section (2) of Section 29 of the Act such transfer of property by the Corporation will vest in the transferee all rights in the property as if the transfer had been made by the owner thereof. The issues raised by the writ petitioner before the High court really pertained to the claim of better title of the writ petitioner to the property in question on the basis of the sale deed dated 29.08.2001. The validity of the sale deed dated 29.08.2001 executed in favour of the writ petitioner by his vendors during the subsistence of the mortgage in favour of the Corporation and the rights of the fifth respondent to the said property on the basis of the sale made in his favour by the Corporation pursuant to the advertisement dated 20.10.2002 are the issues that arose in the Writ Petition. Broad and expansive though the powers of the High Court under Article 226 may be, adjudication of the aforesaid questions, some of which also required proof of certain basic facts, in our view, was not appropriate in the domain of public law. Though the High Court in its order dated 05.12.2006 did not expressly say so, the affect of the several directions issued by it, in fact, amounts to an adjudication of the issues outlined above. The essence of the dispute between the parties denuded the lis a public law character. Nor was any issue arising out of public law functions of the State or its authorities involved. In such a situation resort to the public law remedy should not have entertained by the High Court. (Vide Godavari Sugar Mills Ltd. vs. State of Maharashtra 2013 (6) TMI 23 - SUPREME COURT OF INDIA . Even if the vindication of the writ petitioner s rights under the sale deed dated 29.08.2001 is ignored and we are to proceed on the basis that the writ petitioner questioned the sale made by the Corporation, the writ petitioner would not be entitled to an adjudication of the rights of the parties inter se but at best to a judicial review of the administrative action of the Corporation with regard to the sale made. But as already noticed neither the exercise of the statutory power under the Act by the Corporation in the matter of the sale of the property nor the process of the sale transaction was questioned in the Writ Petition either on account of lack of jurisdiction or abuse of authority. In the above facts, the High Court should have refused an adjudication of the Writ Petition and, instead, ought to have required the aggrieved parties to seek their remedies in an appropriate manner and before the competent civil forum. - Decided in favour of appellants.

Summary

Issues Involved:
1. Validity of sale of property by UPFC in favor of fifth respondent.
2. Rights of writ petitioner based on sale deed dated 29.08.2001.
3. Jurisdiction of High Court in adjudicating the issues.

Issue 1: Validity of sale of property by UPFC in favor of fifth respondent:
The appellant, the fifth respondent, offered the highest amount for the property advertised by UPFC. The entire amount was paid, and the sale was confirmed by the Corporation. However, no sale deed was executed in favor of the fifth respondent. The property had been sold by the original owner to subsequent parties before being advertised for sale by UPFC. The sale was made under the statutory powers vested in the Corporation by Section 29 of the State Financial Corporation Act, 1951. The High Court did not question the validity of the sale process by the Corporation. The Corporation contended that the property could not have been transferred while under mortgage. The High Court's final order canceled the sale made in favor of the fifth respondent, leading to appeals by both parties.

Issue 2: Rights of writ petitioner based on sale deed dated 29.08.2001:
The writ petitioner claimed better title to the property based on a sale deed dated 29.08.2001. The petitioner purchased the property without knowledge of the mortgage in favor of the Corporation. The issues revolved around the validity of the sale deed executed during the mortgage's subsistence and the rights of the fifth respondent based on the sale made by the Corporation. The High Court's interim order allowed the writ petitioner to deposit a sum for possession, but the final order canceled the sale in favor of the fifth respondent.

Issue 3: Jurisdiction of High Court in adjudicating the issues:
The Supreme Court observed that the dispute lacked a public law character, and no issues related to public law functions were involved. The High Court's adjudication of the complex property rights issues was deemed inappropriate for public law domain. The Court stated that the High Court should have refused to adjudicate the writ petition and directed the parties to seek remedies in a civil forum. The Supreme Court allowed both appeals and set aside the High Court's order, emphasizing the need for appropriate forums for resolving property rights disputes.

This detailed analysis of the judgment highlights the key issues surrounding the validity of the property sale, the rights of the writ petitioner, and the jurisdiction of the High Court in adjudicating complex property rights matters.